A Case for Gold and Silver

By Jason TillbergJuly 2008

“We have gold because we cannot trust governments”

Herbert Hoover to President Roosevelt, 1933

Gold Unlike any other element on Earth, almost all the gold

mined is still around. Found in museums, buried beneath central banks, in

bars, on statues, on furniture, on fingers, around necks, in teeth, etc.

Approximately 120,000 tons of gold have been mined (32,000 ounces per ton) 3.84 billion ounces at $900/oz = $3.456 Trillion dollars

Total Assets in US as of Q12008: $70.465 Trillion dollars

US Gold: Fort Knox

Early 1933, as part of new deal, all gold in circulation was seized by the government

Gold was exchanged for dollars at a fixed rate of $20.67 per ounce.

Current holdings at Fort Knox are approximately 147.3 million per ounces.

$900/ oz = $132 billion dollars.

Silver Demand

In 2007, 895 million ounces were demanded.

455 million for industrial applications (approx. 50%). Batteries Solders Electronics Medical applications Mirrors Solar Cells Water Purification

Photography: 128 million Jewelry: 163 million Silverware: 58 million Coins and medals: 37.8

million

Solar

Silver paste is used in 90 percent of all crystalline silicon photovoltaic cells, which are the most common solar cell.

Source: Photovoltaic Technology Division of the U.S. Department of Energy

Silver is the best reflector of thermal energy (after gold).

Silver plays yet another role in the collection of solar energy: efficient reflection of solar heat.

Silver Cont’.

44.54 billion ounces of silver has been mined various sources.

http://www.gold-eagle.com/editorials_05/zurbuchen011506.html

Net supply of silver from above-ground stocks dropped by 8 percent in 2007 to 173.1 million ounces

Source: Silver Institute

Silver Inventories Above Ground

Where are we now?

Supply of silver is low. Investment demand for “hording silver” is

picking up.

Where are we now?

Supply of silver is low . Investment demand for “hording silver” is

picking up. Warren Buffett, Billionaire Investor quoted

on July 26, 2008:“United States was experiencing "exploding"

inflation amid a slowing economy.”

How can the Fed fight Inflation?

Raise interest rates to slow economy and strengthen dollar???

I Disagree and I will tell you why…

Debt Bubble

Year Median US house price Median Household Income Ratio

1980 $47,200 $17,710 2.66

1990 $79,100 $29,943 2.64

2000 $119,600 $41,990 2.84

2007 $196,300 $48,201 4.07

Equity Nightmare

In 1999, the total value of residential real estate in America was $10.429 Trillion. 

Today, there is total of $10.600 Trillion in home mortgages outstanding.

Source: Federal Flow of Funds

My forecast for 2010

If Household income rose 3% from 2007 -2010 household income: $52,671

Ratio of median house price back to mean of 2.7 would make median house price $142,213 or a decline of 28% from 2007

$19.717 Trillion – 28% = $14.2 Trillion

Uh Oh..

$10.6 Trillion in Mortgages Total Residential Real Estate Falls to

$14.2 Trillion. Homeowners Equity would become 25%

Conclusions

Lots more write downs from over leveraged borrowers.

Fed is not in a position to raise rates as that would lead to higher mortgage rates.

Negative Real Rates of Return could be here for a while.

Finding Stocks

… will show you on computer

Thank You

Tillberg Capital Management

www.TillbergCapital.com

631-902-5146